Anchoring can impact investment decisions from "summary" of Advances in Behavioral Finance by Richard H. Thaler
Anchoring refers to the tendency for individuals to rely heavily on the first piece of information they receive when making decisions, even if that information is irrelevant or arbitrary. This cognitive bias can have a significant impact on investment decisions, as it can lead investors to place too much weight on initial reference points, such as the price at which they first purchased a stock or the price at which a stock was trading when they first began following it. When individuals anchor on these initial reference points, they may be reluctant to adjust their views or update their beliefs in response to new information. This can lead to suboptimal investment decisions, as investors may hold on to losing positions for longer than they should or fail to take profits when a stock has appreciated significantly in value. In essence, anchoring can cause investors to become "stuck" in their initial beliefs, preventing them from making rational an...
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